Answer:
Financial advantage of $76,000
Explanation :
Concentrate on the incremental revenues (including incremental savings) and incremental costs (including opportunity cost) of adding the new product line.
<u>Analysis of the addition of a new product line</u>
<u>Sales and Savings :</u>
Sales (6,000 units × $ 180) $1,080,000
Sales of complementary products $31,000
<u>Costs and Opportunity Costs :</u>
Variable manufacturing costs per unit ($140 × 6,000 units) (840,000)
Variable selling costs per unit ($15 × 6,000 units) ($90,000)
Incremental fixed manufacturing costs ($ 65,000)
Incremental fixed selling costs ($ 40,000)
Financial advantage (disadvantage) $76,000
